Digesting good and bad news for Thanksgiving.
Your Bi-weekly update on edible oils & fats by Aveno
November 27th, 2020
Vaccine news boosting demand expectations.
News about several COVID-19 vaccines gave hope that the global economy will be back on track soon. Noticeably, next to other commodity price increases, petroleum prices climbed to their highest in more than eight months, following a drop in weekly U.S. crude inventories and belief that vaccines will boost fuel demand. More fuel demand also means more mandated biofuels consumption.
Petroleum is key to understanding our markets because via biodiesel (biodiesel competes with gasoil) it co-influences the price of edible oils & fats but it is also an excellent indicator for the state of the global economy and more affluent people consume more.
Also, the stock exchange explored new highs before consolidating prior to the long Thanksgiving weekend. But Wall Street also bumped into disappointing job market data and Europe is anticipating a recession.
Amidst good news, hope and bad news, some think that too many people still neglect longer term macro-economic shocks. Last week in the World Cocoa Foundation’s on-line conference, the CEO of Singapore based OLAM Int., one of the world's largest agri-commodity traders, said he believes it will take until end 2022 for economic growth to return to pre-pandemic levels. “We've come down an escalator, but we're going to go back up the stairs," he added.
Source: European Commission / IGC, Monthly average, close November 25th
Sunflower oil
The availability of sunflower oil is still limited and oil is expensive. This is expected to remain for the time being and it is important to cover well in advance to be sure of availability. India and China have been very active on the demand side but now the market seems to be correcting downwards and lost about $ 30/mt after the peak of a week ago.
Soybean oil
South American weather remains supportive and prices are not expected to decline much. Chinese purchases seem to finally decline somewhat, although it is still too early to cheer. In South America, cautiously, yield expectations are already being lowered which is also price-supporting. In the U.S. soybeans struggled to make additional gains and markets sold off: managed funds reduced their overall net long before Thanksgiving to 222,000 contracts. Some think that rapeseed, palm and soybean oil are starting to lose momentum and expect profit-taking and corrections.
Rapeseed oil
The rapeseed market remains firm. Availability has improved slightly but demand for nearby is high. We witnessed nearby short covering and China buying rapeseed oil in EU. The market is in an inverse (higher prices on nearby)! Meaning there is little inventory weighing on the market. Some expect this inverse to roll on till the new crop in August next year.
Beginning this week, in Canada, rapeseed prices hit a seven-year high. In EU, ‘Matif rapeseed’ also rallied to new highs. But later in the week prices saw pressure, with weakening markets ahead of Thanksgiving.
Evolution of crude palm and rapeseed oil prices
(rape $1060.00 / palm $ 891.22 Nov. 26th)
Data source: Thomson Reuters
Palm oil
Stocks remain low even though exports declined and even Chinese buying seemed to take a pause. November exports were reported lower than expected but Malaysian palm oil prices are at an eight-year high…. Prices eased later in the week with Malaysian palm oil trading down, 5% off the highs from last week. The decision that Indonesia will not increase its biodiesel mandate from B-30 to B-40 also helped to cool the market.
USD and mineral oil.
The dollar lost some of its safe-haven luster and investors returned to riskier assets, also in other currencies.
Between fear and hope for fuel demand and higher or lower reported crude inventories, petroleum fluctuates up and down. Brent passed $49, the highest level since march, and then dropped back as worries over near term fuel demand rose because the number of global coronavirus infections continues to rise….
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Aveno's market update and bi-monthly bulletins
There is some complexity to the business we operate in. To help understand the business and to help navigate in a challenging environment, Aveno has launched a series of publications. The bi-weekly market update informs our business relations about the changes in the edible oils and fats environment. The bi-monthly broadly informs its targeted audience about the edible oils & fats market.
You can find all previous updates on: https://www.aveno.be/search/label/newsletter
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Disclaimer
Unless otherwise mentioned the crude oil values quoted in these documents are prices landed in EU without import duties, handling, storage, financing, refining, packing, transport or any other cost related to bring the product to market. They are used as market trend illustration. Substitution of oils is possible but different oils have different fatty acid profiles and are not all interchangeable for all applications. One can make biodiesel from all oils and fats but one cannot make mayonnaise from coconut oil. This document is exclusively for you and does not carry any right of publication or disclosure. This document or any of its contents may not be distributed, reproduced, or used for any other purpose without the prior written consent of AVENO. The information reflects prevailing market conditions and our present judgement, which may be subject to change. It is based on public information and opinions which come from sources believed to be reliable; however, AVENO doesn’t guarantee the correctness or completeness. This document does not constitute an offer, invitation, or recommendation and may not be understood, as an advice. This document is one of a series of publications undertaken by AVENO and aims at informing broadly a targeted audience about the edible oils & fats market. AVENO’s goal is to keep this information timely and accurate however AVENO accepts no responsibility or liability whatsoever with regard to the given information.